The Supreme Court ruled on Tuesday that the Election Commission of India (ECI) is required to maintain complete and current information on each and every political donor and contributions made through electoral bonds (EBs), dismissing the argument made by the election watchdog that it was only required to do so until 2019.
A Constitution bench of the top court stated with reference to an order it issued on April 12, 2019, in a number of cases contesting the legitimacy of EBs as a source of political funding, that its directive to the political parties to submit complete information with ECI regarding the receipt of EBs was a “continuing order” and that it could not be limited to the deadline of May 30, 2019, which was mentioned only for the submission of the details for that specific year (2019).
The polling body was instructed to keep the most recent information on political funding through EBs available for the court to review during the hearing, and this prompted the five-judge bench, led by Chief Justice of India (CJI) Dhananjaya Y Chandrachud, to remind ECI of its duty. However, ECI’s counsel responded that he only had information on EBs through 2019.
“Why only till 2019? This was a continuing mandamus. It was an interim order and it had to continue till the final order. You were supposed to keep such data till date,” the bench, also comprising justices Sanjiv Khanna, BR Gavai, JB Pardiwala and Manoj Misra, told advocate Amit Sharma, ECI’s counsel.
It asked Sharma if ECI’s understanding was that the court’s April 12, 2019, order referenced May 30, 2019, to limit the information’s release to that date.
The top court established a temporary “safeguard” on April 12, 2019, when it ordered all political parties to send a sealed cover containing the specifics of the contributors along with the details of their EB receipts to ECI. This was done as a stopgap solution until the decisions were made about the pending petitions that contested the legitimacy of these electoral bonds. “The above details will be furnished forthwith in respect of Electoral Bonds received by a political party till date,” the directive stated, setting a deadline of May 30, 2019, for the submission of the information.
“Have you (ECI) not kept the data post 2019? Have you been reading para 13 of the order (on the necessity to furnish full information of EBs) to be restricted by para 14 (where the date of May 30, 2019, is mentioned)? Para 14 does not restrict para 13. While para 14 is for the past transactions, para 13 is for the period onward. Para 13 is a continuing direction. It was not confined to the 2019 elections,” the bench told Sharma.
At this, Sharma said that he would consult ECI on the availability of data and revert. “I will take instructions and come back,” the counsel told the bench.
The Constitution bench started looking at a slew of petitions on Tuesday that sought access to political party contribution details. The petitions described the EB scheme as an opaque system that encourages election corruption that undermines the foundation of the nation’s democracy.
During the hearing, senior counsel Kapil Sibal and advocates Prashant Bhushan, Shadan Farasat and Nizam Pasha attacked the scheme, arguing it has opened floodgates to unlimited corporate donations to political parties and anonymous financing by Indian as well as foreign companies. While Bhushan began the submissions on behalf of the group of petitioners by stressing on people’s right to know the source of political funding, Sibal argued that since there is no mandate to use the money received through EBs only for electoral processes, the instrument is used to enrich the ruling political parties and disrupt the level playing field.
Bhushan, appearing for a petition filed jointly by the Association for Democratic Reforms (ADR) and non-profit Common Cause in 2017. Bhushan claimed that the confidentiality clause in the EB scheme defeats people’s right to be informed about the source of funding which is a fundamental right of citizens under Article 19(1) (a).
These bonds are given as kickbacks to the ruling parties, either at the federal level or in the states, which makes this opaque instrument conducive to corruption. Kickbacks are now essentially permitted under the plan. By facilitating the majority of EBs in favour of the ruling parties, it also obliterates the fair playing field in an election democracy, according to Bhushan. He further noted that there are no mechanisms in place to verify such fraudulent transactions and that even a shell firm can make donations through EBs through a subsidiary.
Farasat, who represented the CPI (M), expressed dissatisfaction about the design and implementation of the EB programme, arguing that its purpose is to divert funds from otherwise non-anonymous banking channels to anonymous EBs rather than to filter out illicit funds. On Wednesday, the case’s arguments will also resume.
The bench made it clear during the hearing that it would not discuss the idea of corporations giving to political causes because the Companies Act allows it. “The moment we embraced Section 293A of the Companies Act, corporate quit pro quo became legitimate in our society.” The instant you establish a corporation, there is a quid pro quo component. The bench said, “The big public limited company that donates doesn’t give it in charity.”
The bench also stated that there is disagreement over the petitioners’ claims that such money should remain anonymous to both the general public and the shareholders of the corporation making the donation.
On October 16, the court referred the case to a Constitution bench of five justices, emphasising that the gravity of the situation necessitates the formation of a larger bench to render an authoritative decision.
Introduced in 2018, the State Bank of India issues EBs. Donations made by corporations and even international companies under this programme are 100% tax deductible, and the identities of the donors are kept private by both the bank and the political parties that receive them. Bonds under the plan can be purchased through a KYC-compliant account at any SBI branch in multiples of ₹1,000, ₹10,000, ₹1 lakh, ₹10 lakh, and ₹1 crore. A person or company can purchase any amount of electoral bonds.
All parties that have obtained at least 1% of the votes cast in the most recent Lok Sabha or state election and have registered under section 29A of the Representation of the People Act have been granted a verified account by ECI. The bond can be given by the donor to any recipient, who has 15 days to cash it using the designated account. In addition to an extra 30-day window that the central government specifies during the Lok Sabha election years, the bonds are offered for sale in 10-day windows at the beginning of each quarter in January, April, July, and October.
Attorney general R Venkataramani opposed the petitions in his written submissions on behalf of the Union government on October 27, claiming that citizens do not have a fundamental right to know where political funding comes from and that judicial review is not about scouring State policies for the purpose of suggesting better or different prescriptions. Venkataramani underlined that the EB plan guarantees and encourages the contribution of clean money while providing the contributor with the benefit of confidentiality.
To implement the EB plan, the Centre amended two Finance Acts, Finance Act, 2017 and Finance Act, 2016, both of which were approved as money bills and did not require the Rajya Sabha’s approval. The adoption of the modifications as money bills has also been contested, but that matter is still before a seven-judge bench and is not addressed in the current round of petitions.
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